Cash buyers lift housing

from the Wall Street JournalBuyers in markets around the U.S. are snapping up homes in all-cash deals, betting that prices are at or near bottom and breathing life into some of the nation’s most battered housing markets.

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Homeownership stays at lowest level in a decade

The nation’s homeownership rate remained at its lowest in more than a decade, hampered by a rise in foreclosures and weak demand for housing.


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From the San Francisco Chronicle

Fannie Mae offers housing aid to military families

Mortgage giant Fannie Mae plans to give military families a break on their home loan payments if they are struggling because of the death or injury of a service member.

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From The Sacramento Bee

Five Mistakes Home Buyers Make - From the Wall Street Journal

Even in this market, buyers can get tripped up. Here are a few do's and don'ts for first-timers.

By SARAH MAX

Home buyers are an increasingly rare breed these days. Many who were eager to buy a house raced to take advantage of federal homebuyer tax credits. When those government perks expired in April, home sales essentially went into deep freeze, plummeting to levels not seen in more than a decade, according to the latest numbers from the National Association of Realtors.

Still, the Realtors project that nearly 4 million existing homes will sell in 2010. First-time buyers, without the burden of a home to sell, could benefit from the foul market–and the record low mortgage rates.

But woe to the overconfident buyer. Here are five common missteps that first-time home buyers make.

1. Snubbing the real estate agent

With so many websites offering a mass of data on listings, who needs an agent? Most people, actually. Finding a house and figuring out comps–the price of comparable homes on the market–is the easy part. Managing the nuances of offers, inspections, financing and all the other pivotal steps to buying a home is where many new buyers tend to get tripped up, says Shii Ann Huang, an associate broker with The Corcoran Group in New York.

When you hire an agent to act as your "buyer's representative," she's obligated to put your interests first, even if her commission is paid by the seller and based on the sale price. Skeptical? That's all the more reason to find an agent on your terms. Ask friends and acquaintances for referrals and interview two or three candidates before deciding.

But don't let the agent find you. When Viviane Ugalde and her husband, both physicians, bought their first home in Sacramento nearly two decades ago they made this mistake. "We stumbled onto an agent when she saw us peeking in the windows of an empty house for sale," Ms. Ugalde recalls. The agent, who happened to live on the same block, came out of her house (wearing pajamas), offered to show the couple around the neighborhood, and ultimately helped them find a house. Then the agent, who was new to real estate, neglected to show up for the closing. "It was scary and confusing signing what seemed like a thousand pages," says Ms. Ugalde.

2. Guesstimating how much you can afford

Many buyers mistakenly take a do-it-yourself approach to financing. They use online calculators to estimate how much house they can afford, dive into the house hunt and then get a dose of cold water when lenders refuse to qualify them for that amount. "The process is so different than it was four or five years ago," says Diann Patton, a broker with Coldwell Banker in Grass Valley, Calif. Not only are lenders reading loan applications closely, she says, they're verifying employment and running credit checks multiple times during the process.

Make a date with a mortgage broker or banker before you get serious about your search, says Ms. Patton. Remember, too, that the costs of buying and owning a home go well beyond the sticker price. While online calculators do take into account property tax and insurance, it's up to you to account for maintenance costs, moving fees and association dues.

3. Letting charm cloud your judgment

No one will fault you for falling hard for a charming older home. But, unless the house has been painstakingly remodeled or you're prepared to pay for repairs and upgrades, an old house can quickly lose its allure. Last year Alison Koop, a public relations manager for the University of Washington, came dangerously close to saying "I do" to a seemingly fabulous mid-century home in northeastern Seattle. Ms. Koop was so smitten with the big windows and vaulted ceilings in the living room that she neglected to notice the exposed wires, shoddy roof and other structural problems. Any delusions Ms. Koop had were laid to rest in the guest bathroom. "When the inspector turned the faucet on," she says, "the spigot fell off, hitting the floor of the tub with an exclamatory thunk."

If you're considering an old home, don't let the inspection be your last line of defense, says Jay Papasan, vice president of publishing at Keller Williams Realty. "Negotiate a long due diligence period," he says. That gives you time to get real estimates from contractors and back out if need be.

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Of course, new homes aren't without their drawbacks. Recently, many newly built homes experienced serious problems with Chinese-made drywall, for example. Proceed with care whatever the home's age.

4. Focusing on the house, not the hood

In hindsight, many buyers say they wish they'd taken their due diligence a few steps further to really get to know all the perks, quirks and hassles of living in a particular place. You can always fix up the house, but there's no easy remedy for annoying neighbors, oppressive homeowner association rules and marathon commutes. When Laurie Tarkan and her husband bought their first home in 2001 they were so infatuated with the circa-1924 three-bedroom cottage that–in addition to brushing over some of the headaches of an old house –they didn't give a whole lot of thought to its somewhat out-of-the-way location about a mile from downtown Maplewood, N.J., a popular New York suburb. "As a first-time buyer you're not aware of all the things you should think about that aren't about the house," says Ms. Tarkan, who after living in New York City for 17 years, still hasn't gotten used to driving everywhere.

Spend as much time as you can in your future neighborhood, ideally on different days and times. Eat in the restaurants, drop in a yoga class, test drive your commute.

5. Making arbitrary offers

With housing inventory running high and sales at record lows, in most markets, there's no shortage of houses for sale and sellers desperate to get out from under them–all the more reason to hold out for the right house and the right price. But when you find that perfect house, don't assume you can lob a lowball offer or make unreasonable demands. Even in hard-hit markets, nice houses in desirable neighborhoods are fetching multiple bids.

If the house has been on the market for months, you probably don't need to worry about other buyers lining up behind you. Make an offer based on recent sales for comparable homes, foreclosure activity and market trends, and don't be afraid to start the bidding low. If the house is fresh on the market (or recently foreclosed) and other buyers are circling the block, put your best foot forward but don't get suckered into a bidding war.

Brandon Knapp's Market Update 6/21/10

Will rates remain attractive?


http://www.mmgweekly.com/w/index.html?SID=89e3b2c88ef35d68afff6abeb34bec4c

Credit scores can drop after getting loan help

By ALAN ZIBEL, AP Real Estate Writer Friday, March 19, 2010 Some homeowners who sign up for the government's mortgage assistance program are getting a nasty surprise: Lower credit scores. For borrowers who are making their payments on time but are on the verge of default, the Obama administration's loan modification program can reduce their credit score as much as 100 points. That makes it harder to get a loan and can present a problem when applying for a new job. Housing counselors say it's unfair, especially because the news often comes as a surprise to homeowners. "Why should people's credit be hurt even worse when they're trying to do the right thing?" said Eileen Anderson, senior vice president at Community Development Corp. of Long Island, a housing counseling group in New York. And many homeowners are angry that a program designed to help carries such a penalty, said Kathy Conley, a housing counselor with GreenPath Inc., a nonprofit group in Farmington Hills, Mich. "It's a feeling of being duped," she said. Still, the impact is far less severe than a foreclosure, where borrowers typically find their credit is in tatters for years. That's due to the cumulative impact of many months of missed payments and the foreclosure itself, which drags down a homeowner's' credit by 150 points or more on a scale of 300 to 850. To enroll in the Obama administration's $75 billion "Making Home Affordable" program, borrowers enter a trial period in which they make at least three payments. But some are finding out that their credit score takes a dive during this trial phase. It happens once their mortgage company notifies the three big credit bureaus — Experian, Equifax and TransUnion. For delinquent borrowers, the damage was done when they fell behind on their loans. But for homeowners who are having financial troubles but managing to pay their bills, a request for a loan modification is the first sign of difficulty. And that means a sharp drop in the borrower's credit score. The credit rating industry defends the practice. People who sign up for loan modifications would not be asking for help unless they were having severe money troubles, said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade group in Washington that represents the credit bureaus. "The consumer is going into the program because they're in a financial bind," he said. "Other lenders would need to be aware of that." The Obama administration acknowledges that enrolling in the program can hurt credit scores. But Meg Reilly, a Treasury Department spokeswoman, said that foreclosure "brings far more serious financial consequences for borrowers and their families." The credit score issue is an unexpected consequence of the program that has been plagued with problems and disappointing results since its launch last year. Only about 170,000 homeowners had completed the process as of February. Hundreds of thousands more are still in limbo. Jim Owens, 46, of Harrisburg, Ore., was accepted on a trial basis for the Obama plan last year. He and his family were in bad financial shape. They were barely able to pay the mortgage and utility bills. The main reason: After being laid off and unemployed for six months, he took a job as maintenance director at a retirement home. But it paid only around $25,000 year, about $10,000 less than his former job in a city public works department. He and his wife were also struggling with debt, after taking out a second mortgage four years ago to pay off debt and medical bills. Late last year, he was searching for a used sport-utility vehicle. He got a 30-day approval for $2,000 car loan. But that time ran out before he found a car, so he had to reapply for the loan. He was shocked to learn that, after signing up for the Obama plan, he was denied. "I should have been told," that this might happen, Owens said. "Without credit, you can't do a whole lot in life." A Citi spokesman, Mark Rodgers, said the company follows the Treasury Department's guidelines for reporting to credit bureaus. "We do not determine credit scores," said Rodgers, who declined to comment on Owens' case. The impact is worse for borrowers who enroll in the Obama program and are then ruled ineligible. If homeowners do manage to get accepted into the Obama program and have their loans permanently modified, lenders update the credit bureaus. The new status neither hurts nor helps the borrower's credit score. Over time, they can see their score increase. "The best way to build credit back is to continue to pay bills as agreed, to use credit wisely," said Tom Quinn, vice president of scoring solutions at Fair Issac Corp., which designed the well-known FICO score system.  "As time goes on, the score gradually increases."

Economy in U.S. Preserves Biggest Gain in Six Years (Update1)

March 26, 2010, 9:06 AM EDT

By Timothy R. Homan(Adds economist comment in third paragraph.)

March 26 (Bloomberg) -- The U.S. economy expanded at a 5.6 percent annual rate in the fourth quarter of 2009, and corporate profits climbed, setting the stage for gains in employment that may broaden and preserve the expansion.

The rise in gross domestic product, while smaller than the government’s previous estimate issued last month, marked the best performance in six years, figures from the Commerce Department showed today in Washington. Company earnings increased 8 percent, capping the biggest year-over-year gain in a quarter century.

“Profits are a leading indicator of the economy and suggest continued growth and likely job gains in the second quarter of this year,” John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said in a note to clients after the report.

Caterpillar Inc. and Boeing Co. are among manufacturers seeing demand strengthen as business investment, consumer purchases and exports keep climbing, indicating the recovery is being maintained this year. Federal Reserve Chairman Ben S. Bernanke, citing “weak” labor and housing markets, yesterday said the world’s largest economy still needs low interest rates to sustain growth.

Stock-index futures trimmed earlier gains following the report. The contract on the Standard & Poor’s 500 Index rose 0.3 percent to 1,165.8 at 9:02 a.m. in New York. Treasury securities were little changed.

Less Than Anticipated

The downward revision last quarter reflected larger decreases in commercial construction and stockpiles, and a smaller gain in consumer spending than estimated last month.

For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946.

Fourth-quarter corporate profits, reported today for the first time, increased by $108.7 billion to $1.47 trillion. Earnings jumped 31 percent from the same period in 2008, the biggest such increase since 1984.

Inventory Boost

Efforts to stabilize inventories provided the biggest boost to growth last quarter, contributing 3.8 percentage points to GDP.

Business investment in new equipment advanced at a 19 percent pace last quarter, the biggest gain since 1998. Spending on structures, including office buildings and factories, dropped at an 18 percent pace.

A Commerce Department report this week showed companies ordered more long-lasting goods from factories in February, driven primarily by bookings for commercial aircraft, machinery and metals. The gains suggest the manufacturing rebound will keep propelling the recovery even as commercial construction continues to slump.

Boeing, seeking to reclaim its title as the world’s biggest commercial-plane maker, said this month it will boost production of its largest jets to meet increasing demand. There has been a “dramatic pickup” in air-freight shipments and passenger travel in the past four to five months, marketing chief Randy Tinseth said in a March 19 interview.

Hiring Pickup

Caterpillar, the world’s largest maker of construction equipment, also said this month it plans to hire 500 workers starting this year to expand a generator plant in Newberry, South Carolina. Caterpillar has started recalling some workers in Indiana and other states after cutting more than 19,000 jobs last year amid the recession.

Consumer spending, which accounts for about 70 percent of the economy, rose at a 1.6 percent pace last quarter, compared with the 1.7 percent rate forecast by economists and a 2.8 percent gain in the prior three months. Spending added 1.2 percentage points to GDP. Household purchases dropped 0.6 percent last year, the biggest decrease since 1974.

Purchases in the third quarter received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.

Auto sales this month may exceed a 12 million annualized pace, an improvement from February, according to analysts at J.D. Power & Associates and Edmunds.com. Gains in retail sales for January and February signal consumer spending will contribute more to GDP in the first quarter of 2010.

Jobs Needed

The job market is one part of the economy where a recovery has yet to take hold. Payrolls fell by 36,000 last month after a 26,000 drop in January. The U.S. has lost 8.4 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era.

Payrolls probably increased this month, according to the median estimate of economists surveyed before a Labor Department report due April 2.

“The economy continues to require the support of accommodative monetary policies,” Bernanke said yesterday in testimony to the House Financial Services Committee.

Responding to questions, Bernanke said the “unemployment situation is very weak,” with 40 percent of the jobless being out of work for a long time, and the housing market is “still quite weak.” Policy makers this month reiterated a pledge to keep the target interest rate on overnight loans between banks low for “an extended period.”

--With assistance from Julie Alnwick in New York, Keith Naughton in Southfield, Michigan, and Shruti Date Singh in Chicago. Editor: Carlos Torres

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net

C.A.R. releases “2009-2010 Survey of California Home Sellers”

Report finds 67 percent of California sellers sold their homes due to inability to meet mortgage obligation


LOS ANGELES (Feb. 25) –Changes in family and employment status as well as adjustments to monthly mortgage obligations played significant roles in California’s homeowners’ decisions to sell their homes in 2009, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2009-2010 Survey of California Home Sellers.” According to the report, 67 percent of all sellers in California did so as a result of difficulties related to meeting their mortgage obligation.


“Tighter underwriting standards and a decline in equity continued to impact the market in 2009,” said C.A.R. President Steve Goddard. “Many homeowners chose to sell last year because their adjustable-rate mortgage reset at the same time home prices were experiencing an unprecedented decline, leaving them with little equity and difficulty in qualifying for a refinance.”
“Sellers responded to the challenges of the housing market in 2009 by choosing to work with REALTORS® for guidance and assistance in navigating the complex market,” added Goddard.


Recognizing the value of working with a real estate professional, 99 percent of sellers chose to work with a REALTOR®, according to the survey. Of those, 72 percent cited the ability of an agent to sell the home at a higher price point as the primary reason. Other reasons included better marketing and exposure (38 percent), while 28 percent reported it was too difficult to sell the home independently.


On average, homes sold for $20,958 less than the original asking price in 2009. The median difference between the selling and listing price was $32,315; the list-to-sold-price ratio was significantly larger between first-time sellers ($30,000 below list price) and sellers who had previously sold a home ($8,000 below list price).


The percentage of first-time sellers grew to nearly half of all sellers (44 percent) in 2009, a 33 percent increase from 2008, and nearly three times the 2007 percentage of 15 percent.


Sellers in 2009 cited difficulty meeting the monthly mortgage obligations (30 percent); job loss (18 percent); and “mortgage payment increased” (15 percent) as primary motivation to sell. By comparison, in 2008, one in five sellers cited the ability to meet their mortgage payment obligation; while 11 percent sold due to financial difficulties.


Financing challenges also extended to home buyers and impacted sellers’ confidence in buyers’ ability to secure a home loan. Nearly three-fourths of sellers reported this as a concern, an increase from 54 percent in 2008.


Financial difficulties also impacted the ability of sales to close on time, with 63 percent of homes falling out of escrow prior to closing. Nearly 70 percent of sellers cited “buyer could not get an acceptable mortgage;” and more than 60 percent said “buyer backed out,” as the primary reasons the home fell out of escrow. Other reasons included: Buyer’s remorse (26 percent); “lender withdrew and did not fund” (24 percent); and “home prices continued to decline” (18 percent). Once the home did sell, 50 percent of sellers reported escrow did not close on time in 2009, compared with 36 percent in 2008.


C.A.R.’s “2009-2010 Survey of California Home Sellers” is available for purchase for $49.95 in electronic format at http://www.rebsonline.com/product/1311/2009-Survey-of-California-Home-Sellers-%28PDF-Electronic-Download%29. The survey no longer is available in hard-copy format. Journalists who would like a complimentary copy of the report should e-mail markg@car.org or call (213) 739-8363.


Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with nearly 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Short Sales here to Stay, Title Company Official Tells REALTORS®

Katherine Handley, senior vice president of Old Republic Title Company

Short sale transactions are not just passing through the market; they are here to stay for at least three or more years, according to senior vice president of the Old Republic Title Company Katherine Handley. Handley advised REALTORS® at the Cupertino/Sunnyvale District tour meeting this week to learn as much as they can about these types of transactions, so they can render the best assistance to their clients.

Short sales used to be more prevalent in the lower-end markets impacting the huge, growing subdivisions that had overbuilt and subprime loans, but these days, they are starting to impact higher-end markets. Handley has also observed some lenders have become more pro-active.

“They will curtail REOs as much as possible and be more active in working out a short sale,” Handley said. 

She also stressed, “There is no such thing as a quick and easy short sale. They are brutal.”

With a few exceptions, the standard time for a short sale transaction from close to finish is four to five months, or longer. Handley gave her opinion on several lenders:

• Washington Mutual/Chase is on Handley’s “horrible” list because it could take four to five months or more before you can personally speak to a negotiator.

• Bank of America/Countrywide has improved its process with the introduction of equator.com, which allows licensed agents to register, upload information and communicate through this platform. This appears to be speeding up the process.

• Wachovia is on Handley’s “best” list because this institution is being very pro-active and has local people who immediately meet with the sellers to determine hardship. Transactions can take only 45 days. This lender will also offer up to 7 percent commission for agents. It is the only lender to give the seller a cash-out at closing.

• Wells Fargo is also improving slowly.

Here is Handley’s advice to REALTORS® whose clients are considering a short sale:

1. Give your client ALL options up front, so your client can decide whether a short sale or a foreclosure is the right route to take.

2. Partner with a knowledgeable, experienced attorney and CPA even before putting the property up as a short sale. These experts will be able to advise and guide your client on what to expect.

3. Make sure you know whether the seller has a recourse or nonrecourse loan. Handley said at one time second lenders were complacent and satisfied with a small amount of money; these days they have become more aggressive and even ruthless, pursuing the seller immediately after closing.

4. Prepare the seller, buyer and buyer’s agent for the time frame. “Make sure all parties are willing to go all the way. If they are willing to hang on, then you will have a greater chance of success,” Handley said.

5. Once the lender reviews the package and comes back with conditions, be proactive and creative with solutions.

6. Read the short sale approval letter carefully. The letter will contain conditions that affect the buyer and the seller. These letters are time sensitive, usually with a window of 30 days. Delays will come at a price, such as losing the deal, a reduction in commission or a per diem fine.

7. Make sure letters between the first and second lenders match.

8. Make sure it is an arms-length transaction. Parties cannot be related.

9. There are no flips on short sales; you cannot immediately transfer the deed to the property.

10. Learn everything you can about short sales.

“The best advice I can give you is learn short sales, arm yourself with someone who can give you tax and legal advice, learn what they are all about so you can be a true professional and help your client,” Handley said.

New 2010 Real Estate Laws

Many new laws for real estate have been passed for 2010. They are lengthy and wordy and not always easy to understand. However, the California Association of Realtors has done a good job of putting together a table of the laws, with a summary of what each of them means. You can find that table here.